On July 9, the Commodities Futures Trading Commission(CFTC) announced that a US federal court has imposed a permanent ban and penalty against trading platform PaxForex. The St-Vincent-based firm run by Laino Group Limited was charged with hosting unlicensed leveraged crypto assets in 2020. PaxForex Prohibited from Operating in the US by Federal Court According to the verdict delivered by Judge David Hittner of the U.S. District Court for the Southern District of Texas, PaxForex is permanently banned from trading, solicitation, and registration in the US. Additionally, Laino Group, the firm behind PaxForex, will pay a civil penalty of $374,864. The case relates to a complaint filed on September 24, 2020, that accused PaxForex of engaging in “illegal, off-exchange transactions in Ether, Litecoin and Bitcoin, in addition to precious metals and foreign currency with retail customers on a leveraged, margined, or financed basis.” As per Judge David Hittner, the trading platform’s leveraged crypto trading operations violated the Commodities Exchange Act(CEA) as it failed to register with the CFTC. The CFTC and Federal Bureau of Investigation worked in tandem to bring charges against PaxForex in September last year after seizing the company’s domain name. CFTC Warns Investors Against Unregistered Firms Bringing charges against PaxForex was a significant win for the authorities as the firm maintained no physical presence in the US. However, that did not deter it from acting as a futures commission merchant (FCM) that allowed people in the US and other countries to trade in cryptocurrencies and other assets. Barring certain exceptions, which do not apply in PaxForex’s case, the US requires companies offering derivatives and futures contracts trading to register with the Securities and Exchange Commission(SEC). Also, laws indicate that transactions of this nature should be conducted through a registered exchange. In the aftermath of this incident, the CFTC has urged the people to verify a company’s registration with the regulator. According to CFTC, investors must look into a company’s legal status to avoid committing funds to unregistered entities. Consumers can easily find information about a firm’s or individual’s registration status on the National Futures Association(NFA) website.
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